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Disentangling Economic Thinking - YouTube
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david colander and richard holt and i
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have a series of several books and a
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whole bunch of papers and we're still
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doing these things studying kind of
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where is economics going and and what's
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the nature of economics and some of this
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work has created some backlash i'm
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barclay rosser or jay barclay rosser jr
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and i'm at james madison university i
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headed to the journal of economic
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behavior and organization for a decade
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and i'm currently editing a new journal
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the review of behavioral economics you
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have sort of three terms if orthodox
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mainstream and heterodox and to some
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degree we were inspired by seeing being
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unhappy with mostly heterodoxy
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economists who would talk about
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mainstream orthodoxy or mainstream
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orthodox neoclassical economic lumping
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these things together so it's like
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heterodox versus this
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homogeneous mainstream orthodox
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and we sort of decided things a little
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more complicated so we decided there's
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sort of two aspects here so one is an
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intellectual aspect
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and one's a sociological aspect
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orthodoxy is really an intellectual
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category so this is when we think about
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standard neoclassical economics
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equilibrium and
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individual maximizing and rationality
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uh these are aspects of this sort of
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chicago school will be the sort of
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supreme of this but it's in much of the
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rest of the profession as well
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this is orthodoxy intellectual orthodoxy
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mainstream though is really a
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sociological category it's it's the
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people who are in charge
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now some of the people in charge are
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orthodox but a lot of the people in
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charge really don't uh support orthodox
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ideas they're they're non-orthodox
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intellectually but they're
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somehow they're you know they're at mit
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and they're at harvard and they're at
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berkeley and stanford and these places
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think about somebody like george ackel
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often so so people are doing behavioral
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economics or vernon smith or
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experimental economics i mean so if
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people are very respected and uh they're
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leaders of the discipline but their
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their ideas are not
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they're not standard neoclassical
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they're not orthodox um but they're very
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influential um heterodoxy however
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combines the both so it is both
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intellectual and sociological so people
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who are sort of self-styled heterodox
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uh are both certainly intellectually
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non-orthodox
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but also sort of they're not and they're
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not in charge they're sociologically
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cast and and this has led to of course a
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lot of unhappiness but i will also note
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over time that some of the this whole
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emergence of you might say this sort of
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non-orthodox mainstream that that's
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something that's happened over the last
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couple of decades uh the sort of
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emergence of these sort of alternative
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ideas which we are very much encouraging
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that's been more in the last couple of
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decades and it's become more important
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but i think a lot of a lot of heterodox
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economists sort of
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are unhappy with thinking about that
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they prefer to kind of have this duality
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between the
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mainstream orthodox and the heterodox
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and the world's more complicated if not
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complex the standard neoclassical model
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just usually assumes homogeneous agents
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especially at least at the macro level
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of course microeconomics has always had
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individuals have their own preferences
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but usually you don't have these sort of
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interactions sort of people's
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preferences are on what i'm consuming
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and that's it
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you don't really worry about what other
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people are thinking or what other people
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relate to so
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these interactions allow for nonlinear
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dynamics and feedbacks that don't happen
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in standard models and complexity
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economics is sort of a major
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theme of my research that cuts through a
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lot of different areas modern
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econophysicists actually claim that it's
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physicists doing economics but there are
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also a lot of economists working with
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some of these physicists and trying to
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kind of get a middle ground i mean
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there's a very long history of course of
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physics influence on economics and
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economic theory you can go back and paul
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samuelson
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many of his ideas that are very standard
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were drawn from physics people like
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philip murowski have written books about
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this sort of thing but this is a newer
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this is a newer set of ideas so one of
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the big themes has to do with
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probability distributions so let's say
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in financial economics and also on
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income distributions standard economists
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think about gaussian normal
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distributions
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but we know
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that wealth distributions and capital
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income distributions and also financial
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market return distributions these are
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not unrelated issues i have what are
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called power law distributions so they
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have fat tails they have greater
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extremes so you have great extremes of
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wealth you have great extremes of
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financial market outcomes going up and
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down and with speculative bubbles and
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bursts
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and the counter physicists they are much
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more willing to use these kinds of
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distributions these kinds of models it's
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really quite amazing you can pick up
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graduate textbooks by like say john
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cochran or somebody
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very advanced graduate textbooks
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hundreds of pages long and you will find
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no mention of of of leptokurtotic or fat
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tail distributions they're using these
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gaussian normal distributions which
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simply don't fit reality so the kind of
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some of the kind of physicists are
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coming in and saying
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you know you need to look at facts you
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need to be more scientific of course
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some of the economists come back and say
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well but you need some economic theory
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you have no economic theory you're just
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you know making things up here but again
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the account of physics models also tend
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to involve nonlinear feedbacks nonlinear
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dynamics
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there's a close link with sort of the
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broader complexity literature a lot of
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the some of the important economic
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physicists like doing farmer who's at
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the santa fe institute i used to be you
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know they were originally coming out of
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doing chaos theory and all kinds of
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nonlinear dynamics and now
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doing all kinds of econophysics uh
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models and so on some behavioral
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economics is
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i mean it's getting more recognized and
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we've had a couple of nobel prizes i
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mean thaler just got the nobel prize and
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we've had a few others but uh people are
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taking it more seriously i mean i think
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one of the things that this is one of
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those areas where a lot of people
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realize that you know the world really
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is how do people actually behave in
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economics
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behavioral economics tells you because
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behavioral economics is they don't
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always follow what economic theory says
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they don't follow you know the
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neoclassical individual rationalistic
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kinds of models we're back to this stuff
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that
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colander and and holt and i were talking
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about so people behave in all sorts of
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ways and you know it may or may not be
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rational but you have to if you want to
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understand how the economy works what's
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going on you have to actually look at
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how people behave and people do the
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darndest things as the old television
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show used to say
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